Investment strategy

Time to organize taxes

Time to organize for income taxes

February 20, 2015

Well, folks, it’s time again to start thinking about filing your 2014 tax return.My job here is to make the process as painless as possible for you, whether you file yourself or use a professional tax preparer.

(We are also approaching the end of February and the RRSP contribution deadline. I recommend you review Joel Schlesinger’s great column from Feb. 14 (www.winnipegfreepress.com/opinion/columnists/36052974.html) This will tell you everything you need to know to help you make the right RRSP decision for you.

My big, profound tax preparation tip is to start early and get organized. It’s so much easier that way.Right now, review last year’s return and list of information slips.Copy that list of slips to use as your initial checklist for making sure you have all the paper you need before starting. This way, you can follow up on any missing slips before getting fully engaged in the process.

I am a big fan of using a professional accountant if you have a complicated situation, or if taxes are simply not your thing.Best you focus on what you do best.

On the other hand, if you have a relatively simple situation, a computer and the temperament, doing your own return can teach you a lot about your financial situation and how to improve it. With the commercial software available now, it’s certainly easier than ever.

Either way, take this opportunity to get educated. If you use a tax preparer, I still strongly recommend that you organize your own slips, to really see your sources of income, deductions and credits, and then after your return is filed, review it carefully.

If you file early enough, you might even be able to go over the return with your tax preparer, which I strongly suggest. Every situation is different, but it’s important to understand the items that reduce the amount of income tax you pay.

These could be things like pension transfers between spouses, credits for children’s sports and artistic activities, for providing care to a dependent family member, monthly transit passes, tuition and post-secondary education credits (or transfers of these from children), and many other items.

For 2014, there is also the new “Family Tax Cut”, which allows a new credit, created by transferring up to $50,000 of income from the higher income spouse’s return to the other. This is only allowed in households with children under 18 in 2014.

For the Family Tax Cut, CRA reminds us to claim all non-refundable tax credits on Schedule 1, even if these were not previously needed to reduce tax to zero.Some of these credits may again be relevant after the transfer of income to the lower income spouse.

So, you now have a list of the information slips you expect. This may include a Trading Summary from your investment company, if you have investment accounts.Remember you have to add up your capital gains and losses for the year, to determine your net claim, and report all interest and dividends received.

The next step is to list all of the deductions and credits to which you may be entitled. I’ve listed some of them above. Additional items might include:

RRSP contribution

Donations (including first time donor’s “super credit”)

Child care expenses

Pension transfer

Home Buyer’s Amount (1st timers)

Pension credit

Age credit

Disability tax credit (requires a special application and medical certification)

Many online resources are available, so do some research.A good place to start is www.cra-arc.gc.ca/getreadywhich is the Canada Revenue Agency’s checklist, with a ton of useful information, including how to NETFILE your own return and a list of certified software, most of which provide free versions for certain taxpayers.

So, tax credits, deductions and free stuff -what could be better than filing your tax return? Okay, it might not be your favourite thing, but my strong recommendation is to make it a fun project with a goal of reducing your taxes, and try to make it enjoyable rather than a last-minute chore.

(And better to get most of the done while it’s minus 20 outside, rather than wait a few weeks until spring arrives.)

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Dollars and Sense is meant as an introduction to this topic and should not in any way be construed as a replacement for personalized professional advice.

David Christianson, BA, CFP, R.F.P., TEP, CIMis a financial planner and advisor with Christianson Wealth Advisors, a Vice President with National Bank Financial Wealth Management, and author of the book Managing the Bull, A No-Nonsense Guide to Personal Finance.

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